Oil gains nealy 3% on dip-buying as surplus concerns cap upside

Onome Amuge

Oil prices staged a recovery on Tuesday, buoyed by technical buying and bargain hunters stepping in after a sharp decline triggered by OPEC+’s decision to accelerate output increases. However, underlying concerns about a potential supply glut continued to cast a shadow over the market.

Brent crude futures climbed $1.67, or 2.8 per cent to $61.90 a barrel, marking its first gain after a six-session losing streak. U.S. West Texas Intermediate crude followed suit, adding $1.61, or 2.8 per cent to $58.74 a barrel. 

Both benchmarks had sunk to their lowest levels since February 2021 in the previous session, reacting to the weekend announcement from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to further accelerate production hikes for the second consecutive month.

“It’s rather surprising that we got this rebound this morning,” commented Bjarne Schieldrop, chief commodities analyst at SEB. He noted the psychological significance of the $60 per barrel mark, suggesting that the dip below this level had attracted buyers.

The rebound comes after oil had shed over 10 per cent in six straight sessions and more than 20 per cent since April, a decline fuelled by fears of a global economic slowdown sparked by US President Donald Trump’s tariff threats. 

The return of Chinese market participants following a five-day public holiday also provided some support to prices. “China also reopened today, and being the largest importer, buyers would have likely jumped to secure oil at current low levels,” stated Priyanka Sachdeva, senior market analyst at Phillip Nova.

Further underpinning the gains were Saudi Arabia’s latest official selling prices.

According to Giovanni Staunovo, commodities analyst at UBS, these prices showed only an unwinding of previous OPEC+ cuts, indicating a limited appetite for aggressively pursuing market share. “This will have readjusted some expectations,” Staunovo added.

Economic data from the US also offered a glimmer of support, with a report showing an unexpected pickup in the services sector’s growth in the previous month. The Institute for Supply Management (ISM) revealed that its non-manufacturing purchasing managers index (PMI) rose to 51.6 in April, exceeding economists’ forecasts.

However, analysts remained cautious about the sustainability of the price recovery. “Today’s slight rebound in oil prices appears more technical than fundamental,” cautioned Yeap Jun Rong, a market strategist at IG. He pointed to persistent headwinds including a pivotal shift in OPEC+ production strategy, uncertain demand amid U.S. tariff risks, and price forecast downgrades as factors continuing to weigh on the broader price movement. 

The US Federal Reserve’s anticipated decision to leave interest rates unchanged on Wednesday, amid the backdrop of tariff-related economic uncertainty, is also expected to keep a lid on price gains.

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